Jan. 7 (Bloomberg) -- U.S. stocks fell, after the Standard
& Poor’s 500 Index climbed to a five-year high, as investors
awaited the start of the corporate earnings season tomorrow.

Boeing Co. slumped 2 percent as a 787 Dreamliner operated
by Japan Airlines Co. caught fire on the ground today at
Boston’s Logan International Airport. Applied Materials Inc.,
the world’s largest producer of chipmaking equipment, declined
1.2 percent after being downgraded at JPMorgan Chase & Co.
Amazon.com Inc. rallied 3.6 percent to a record high after
Morgan Stanley upgraded the world’s largest online retailer.

The S&P 500 fell 0.3 percent to 1,461.89 at 4 p.m. New York
time. The Dow Jones Industrial Average lost 50.92 points, or 0.4
percent, to 13,384.29. About 5.8 billion shares changed hands on
U.S. exchanges, 5 percent below the three-month average.

“We’ve come a long way in a very short time,” Tom Wirth,
who helps manage $1.6 billion as senior investment officer for
Chemung Canal Trust Co., in Elmira, New York, said in a phone
interview. “I’m expecting better-than-anticipated earnings. Yet
we need to see some consolidation first.”

The S&P 500 ended last week at the highest level since 2007
after data showed employers added workers in December at about
the same pace as the prior month. The gauge rallied 2.5 percent
on Jan. 2 after Republicans and Democrats agreed on a compromise
budget that avoided the so-called fiscal cliff of sweeping tax
increases and spending cuts.

Earnings Season

Alcoa Inc. will unofficially start the U.S. earnings
reporting season after the market closes tomorrow. Fourth-quarter profits at S&P 500 companies grew an average 2.9
percent, according to data compiled by Bloomberg. Excluding
financial companies, earnings increased 0.5 percent.

Eight out of 10 groups in the S&P 500 retreated today as
utility and energy companies had the biggest losses, dropping at
least 0.8 percent. Telephone and health-care providers advanced
more than 0.3 percent.

Boeing declined 2 percent to $76.13. The company’s all-new
model, which has a fuselage made of composite materials instead
of aluminum and has more electric-operated systems than earlier
models, has been plagued by incidents since the first plane was
delivered to an airline at the end of 2011.

Applied Materials dropped 1.2 percent to $11.67. The stock
was downgraded to underweight from neutral at JPMorgan by
analyst Christopher Blansett. The share-price estimate is $10.

New Coverage

Archer-Daniels-Midland Co. retreated 4.1 percent to $28.01.
The world’s largest corn processor was rated underweight in new
coverage at JPMorgan by equity analyst Ann Duignan. The share-price estimate is $28.

Apple Inc. lost 0.6 percent to $523.90 after Barclays Plc
slashed its share-price estimate for the world’s most valuable
company to $740 from $800.

Illumina Inc. tumbled 7.1 percent to $50.90. The U.S. maker
of DNA sequencing equipment fell after Roche Holding AG
indicated it may no longer be interested in buying the company.

$215 Billion

Speculators are abandoning money-losing bets that stocks
with the closest links to the U.S. economy will fall as
America’s most-hated shares stage the best rally in a year
relative to the broader market.

The 20 stocks with the highest short sales in the S&P 500
rose an average of 5.1 percent in December, compared with 0.7
percent for the full gauge, according to data compiled by
Bloomberg. The performance gap is the widest since January 2012.
Companies from U.S. Steel Corp. to J.C. Penney Co. are gaining
at the expense of phone companies and utilities, which usually
do best when the economy contracts.

Bulls vs Bears

Market bulls say the capitulation underscores growing
confidence in the U.S. recovery, while bears say the rally shows
indiscriminate buying as earnings estimates fall close to a one-year low. The change echoes money manager Laszlo Birinyi’s
prediction that the four-year bull market will finally attract
investors who have stayed away from equities.

“Let’s put it this way, I made more money on my longs than
on my shorts,” Gilles Sitbon, who helps oversee $2.1 billion at
Sycomore Asset Management in Paris, said in a phone interview on
Jan. 3. His Sycomore Long-Short Opportunities fund rose 15
percent in 2012. “It’s not just hard to be short, it is
painful.”